2021 is history. As the global and U.S. economies continued to recover from COVID global stocks had another good year.
- S&P 500 (SPY): +27%
- NASDAQ (QQQ): +21%
- Dow Jones (DJI): +19%
- Vanguard Global Stock Market (VT): +16%
- Emerging Markets (EEM): -5%
- Renaissance IPO ETF (IPO): -11%
- Advisorshares US Cannabis ETF (MSOS): -35%
A few of our favorite sectors did well. Big tech had another good year, driven by strong sales and earnings growth.
- Google (GOOG): +70%
- Apple (AAPL): +40%
- Facebook (FB): +30%
- Amazon (AMZN): +5%
Food and energy stocks were on fire in 2021, driven by rising demand and record high inflation. I made a bullish call on these stocks this summer and spoke to my clients about the opportunity. Here’s a link to the article if anyone wants to review. Has the Next Commodities Super Cycle Arrived? Here is how our food and energy stocks did in 2021.
- Devon Energy (DVN): 139%
- Conoco Phillips (COP): 82%
- The Andersons (ANDE): +55%
- Bungee (BG): +33%
There were also a few sectors where we struggled.
Mid and smaller sized tech stocks were hot early in the year but cratered in the second half of 2021.
- Paypal (PYPL) fell 35% from the 52-week high.
- Match (MTCH) fell 33% from the 52-week high.
- Beyond Meat (BYND) fell 70% from the 52-week high.
IPO stocks had a very tough year. After jumping higher in 2020, The Renaissance IPO Index (IPO) was down 12% in 2021 and down 35% from the 52-week high. There was nowhere to hide. Any investors active in IPOs in 2021 took a hit. Here are some more details from CNBC.
CNBC identified 55 tech companies that debuted in the U.S. this year through an IPO, special purpose acquisition company or direct listing. Only one of them — GlobalFoundries — is less than 20% off its high price.
That means the rest are in bear market territory, typically defined as a drop of 20% or more from their peak. Ten of those companies have slid by at least that much in just the last week.
Even worse, 23 of those companies have lost half or more of their value. since reaching their highs, including Robinhood, which has plummeted 74% from its top in early August, and LegalZoom, which has plunged 58% since peaking in July. All prices are as of Monday’s close.
We saw our struggles in IPOs this year along with the larger trend.
- Affirm Holdings (AFRM) fell more than 65% from its IPO price.
- Bumble (BMBL) fell more than 60% from its IPO price
- Coinbase (COIN) fell more than 50% from its IPO price.
Cannabis stocks also struggled in 2021. The Advisorshares US Cannabis ETF (MSOS) fell more than 50% from the 52-week high and closed the year down 35%. The two main reasons for the weakness?
Investors are worried about high federal tax rates when cannabis goes legal after lawmakers floated a federal cannabis bill in July that included a 25% federal tax within a few years.
Cannabis stocks also struggled because the California legal cannabis industry is on the verge of collapsing because high taxes make it difficult for the industry to compete with the illegal market. Here is a link to a report with more details.
California Pot Companies Warn of Impending Industry Collapse
For the record I still think the U.S. cannabis industry has plenty of growth potential but the industry needs major tax relief. We’ll see how this plays out for the next few months.
What is the Path Forward in 2022?
Here is the message I am sharing with my clients as we head into 2022. I am still expecting stocks to do well in 2022 but this is a year to be more conservative.
Here are head winds.
- Many stocks are up a lot in the last two years.
- Inflation is a very real problem for consumers.
- The Fed will start raising interest rates this year.
Here are the tail winds.
- More economic recovery from the COVID.
- More sales and earnings growth for S&P 500.
- Stocks have upward momentum.
I have been very active communicating with my clients and working hard to get portfolios re balanced for 2022.
My big move for 2022 has been massively de risking portfolios. This includes selling mid and small sized tech stocks, selling IPO stocks and trimming down on cannabis stocks.
Here’s how the growth portfolios are mostly set up for 2022.
Index Funds – S&P 500, Mid Caps, Small Caps, Vanguard Global.
Big Tech Stocks – Apple, Google, Amazon, Facebook.
Food and Energy Stocks – Devon, Conocophillips, The Andersons, Bungee.
Cannabis Stocks – very small allocation for long-term investor who are comfortable with high volatility for high potential return.
I think we’re in position for a very solid year in 2022. Please contact me with questions. In the meantime have a great day!
Disclaimer: This report is for entertainment purposes only. Every investor should consult with an investment advisor before making investment decisions. The Vodicka Group, Inc. is not a broker/dealer. We do not receive compensation for mentioning stocks. At various times, the clients, publishers and employees of Vodicka Group, Inc., may buy or sell the securities discussed for purposes of investment or trading.
Author Michael Vodicka owns shares of Devon Energy (DVN), Conoco Phillips (COP), The Andersons (ANDE), Bunge (BG), Google (GOOG), Apple (AAPL), Amazon (AMZN), Vanguard Global Stock Market (VT), iShares MidCap Fund (IJH), iShares SmallCap Index Fund (IJR), Nasdaq 100 (QQQ).
